State Spending On Dual Eligibles under Age 65

May 31, 2012

There is considerable variation in Medicare spending across regions and states, even after adjustment for a variety of health and socioeconomic factors. A new study in the journal Health Affairs suggests that a partial answer comes from actions by the states, in which they shift health care services from Medicaid, which is funded partially by the states, to Medicare, which is wholly federally funded.

The interest of the states in this matter is clear: the more "dual eligibles" (people who qualify for both programs) they can shift from Medicaid to Medicare services, the less they will have to pay out for their share of Medicaid.

The new study used data compiled by the Kaiser Family Foundation of 1,027,660 Medicare enrollees, 533,479 of whom were dual eligibles.

Average Medicare expenditures for dual eligibles in this age group was $9,878 in 2007, considerably higher than average Medicare spending for enrollees in the age group who were not dual eligibles ($7,428).

The study found evidence of a negative association between Medicaid and Medicare spending for dual eligibles under age 65 by state, suggesting that Medicare expenditures appeared to substitute for Medicaid expenditures.

Total Medicare per capita spending for dual eligibles under age 65 ranged from $7,072 in Vermont to $14,597 in Texas, a twofold difference that has no other explanation than differing policies among the states and program-shifting efforts.

The study also found that state-level spending patterns for dual eligibles were very similar to those for Medicare enrollees under age 65 who did not qualify for Medicaid. This suggests that states have made a concerted effort to limit their expenses with dual eligibles to the point that they received few services through the Medicaid program.

This is of great significance because of the financial implications. Efforts to shift patients from Medicaid to Medicare services can entail unnecessary expense. For example, replacing nursing home care with hospital care accomplishes the shift but costs a great deal more. Thus, shifting efforts can harm patient outcomes while driving up costs.